Obama’s Counterproductive New Iran Sanctions

Tensions between the United States and Iran have spiked once again. Last week, responding to planned U.S. sanctions against Iran’s central bank, Tehran threatened to close the Strait of Hormuz, the shipping gateway for one-fifth of the world’s oil. U.S. President Barack Obama, pressed by Congress’ near-universal support for tough new measures to force Iran to abandon its nuclear ambitions, decided to go ahead with the sanctions and signed them into law on Saturday. Fully enforced, they would slash one of Iran’s foremost state revenue streams and virtually excise one of the world’s leading oil exporters from the marketplace.

The chain of events fueled concerns that Washington might be stumbling into a third war in the Middle East. But a more fundamental problem underlies these developments. The Obama administration’s new sanctions signal the demise of the paradigm that had guided U.S. Iran policymaking since the 1979 revolution: the combination of pressure and persuasion. Moreover, the decision to outlaw contact with Iran’s central bank puts the United States’ tactics and its long-standing objective — a negotiated end to Iran’s nuclear ambitions — fundamentally at odds. Indeed, the United States cannot hope to bargain with a country whose economy it is trying to disrupt and destroy. As severe sanctions devastate Iran’s economy, Tehran will surely be encouraged to double down on its quest for the ultimate deterrent. So, the White House’s embrace of open-ended pressure means that it has backed itself into a policy of regime change, something Washington has little ability to influence.

For the moment, at least, the central bank sanctions remain a work in progress. The text of the law provides the executive branch with reasonable flexibility, including a national security waiver. It also appears to condition enforcement on world oil supply considerations and offers foreign governments a six-month amnesty period, during which they may figure out where else to buy crude, or, presumably, develop workarounds to continue buying from Tehran. Obama hedged, too, by appending a signing statement to the bill, asserting his right to disregard any measures that impinge on his authority to set U.S. foreign policy. To be sure, perfect enforcement of this sanctions regime would drive up the price of oil. And election-year concerns about the economy could ultimately trump Obama’s determination to penalize Iran. Still, Congress may have other ideas.

Senior U.S. officials are bullish on the prospective impact of sanctioning Tehran’s central bank. Allies such as Japan and South Korea, which together account for approximately one-third of Iran’s crude exports, will follow Washington’s lead. U.S. officials also point to Tehran’s announcement that it is once again ready to meet with the P5 plus 1 (the multilateral group that has spearheaded Iranian nuclear talks, albeit with little success) as evidence that increasing pressure is focusing the minds of Iranian leaders.

Lest Washington forgets, the Islamic Republic has endured more draconian economic pressures in the past.

Such optimism, however, is premature. Tehran has a penchant for signaling just enough interest in negotiations to retain a measure of goodwill among some segments of the international community — particularly countries in Asia that are increasingly vital for Iran’s economic stability. Tehran also might calculate that a show of receptivity could undermine the fragile consensus between the hawkish Americans and the Europeans, who are moving forward with their own ban on Iranian crude, and their more sanctions-averse partners in Moscow and Beijing. There is also, of course, Iran’s well-honed capacity for sanctions-busting and evasion, which will blunt the impact of these new sanctions.

Lest Washington forgets, the Islamic Republic has endured more draconian economic pressures in the past. Despite its phenomenal petroleum resources, rarely in its 32-year history has the Islamic Republic been flush. During the height of its war with Iraq, Iran’s annual oil revenues fell under $6 billion — less than ten percent of its 2010 take. Skyrocketing income from oil sales over the last decade has been a welcome anomaly for Iran’s revolutionaries, but it is hardly certain that constricting that spigot will doom the regime, much less force it to capitulate on the nuclear issue. Tehran remains confident in its ability to adopt austerity as needed. In fact, blaming an international bogeyman will offer convenient cover for the regime’s own economic mismanagement.

The Obama administration has argued that “pressure works,” pointing to past reversals by the Islamic Republic, including the grudging and belated acceptance of a cease-fire to end its eight-year war with Iraq. Yet this formula disregards two critical points: first, Tehran has been under tremendous pressure to change its security policy throughout its entire post-revolutionary history, yet that policy has proved remarkably durable. Second, Iran’s major concessions have come not simply as a product of pressure but because of the declining utility of the original objective. In this instance, however, the tables are turned. The more Washington corners Tehran, the higher the value of a nuclear deterrent becomes in the eyes of the leadership.

Although this suggests more friction ahead, it does not mean that a military clash is absolutely on the horizon. Neither side wants war: not Washington, which has worked assiduously to meet the president’s timetable for winding down the two other military engagements in the broader Middle East, and not Tehran, which prefers the more familiar (and lower-risk) options availed through proxies and terrorist activities. A prolonged low-intensity struggle — with plenty of blustery rhetoric and diplomatic hardball — is now the new normal.